Hydrogen energy systems require continued investment to beat the devastating effects of climate change. Many companies are operating in the space, and investors have made and lost fortunes investing in promising hydrogen technologies.
An abundance of hydrogen doesn't help the fact it's expensive and challenging to produce as an energy source. Thankfully we're now seeing the green shoots of a hydrogen-powered future.
What are the best Hydrogen Stocks?
First things first, an ETF, such as the Global X Hydrogen ETF (HYDR), is an excellent place to hunt down the most popular hydrogen stocks.
The HYDR fund provides global exposure to companies that benefit from the hydrogen economy. It focuses on four segments of the hydrogen economy: production, fuel cells, technology, and integration.
Recent additions to this ETF include:
Bloom Energy Corp (NYSE: BE)
Plug Power (NASDAQ: PLUG)
Ballard Power Systems (NASDAQ: BLDP)
Fuelcell Energy (NASDAQ: FCEL)
McPhy Energy (EPA: MCPHY)
Companies recently sold from this ETF include:
Chart Industries (NYSE: GTLS)
Hydrogen Refueling Solutions (EPA: ALHRS)
Hexagon Purus (OTCMKTS: HPURF)
Fusion Fuel Green (NASDAQ: HTOO)
Blackrock (NYSE: BLK) is the world's largest asset manager, with approximately $10 trillion in assets under management (AUM). It also recently made substantial investments in the hydrogen space, with stakes in both Plug Power (NASDAQ: PLUG) and FuelCell Energy (NASDAQ: FCEL).
The asset manager raised $4.8bn for a new fund specifically focused on renewable power assets—more than doubling its initial target raise.
BlackRock also owns stakes in Italian company Enel, and TotalEnergies, both of which are venturing into the hydrogen field.
In his 2022 Annual Letter to Chief Executive Officers, BlackRock CEO Larry Fink said:
Every company and every industry will be transformed by the transition to a net zero world. The question is, will you lead, or will you be led?
Are Hydrogen Stocks a Solution to Climate Change?
Hydrogen is clean, and as it's found in water, the supply is abundant. If hydrogen can be safely utilized, it could meet the world's power demand.
Its only emissions should be water, which won't damage the environment. However, if hydrogen gas leaks into the atmosphere, it can increase greenhouse gas levels and contribute to climate change. Therefore, reducing leaks is vital to hydrogen's long-term success.
The Popularity of Hydrogen
Hydrogen has been touted as the holy grail of energy production since the 1970s but has never quite delivered with the confidence of oil and gas or lithium.
Yet, hydrogen-powered cars, boats and trucks have arrived in recent years, and the tech appears powerful enough to make a lasting impression.
Steel manufacturer SSAB says its technology, which uses green hydrogen instead of coal, could cut Sweden’s CO2 emissions by 10%.
Fuel cell electric vehicles (FCEVs) are hydrogen-powered. Therefore, they're expected to be far more efficient than traditional vehicles. Plus, they don't release dangerous emissions into the atmosphere.
Toyota (NYSE: TM) makes FCEVs. The company has joined forces with Air Liquide and CaetanoBus in Europe to accelerate the expansion of hydrogen transport for light and heavy-duty vehicles.
Honda Motor (NYSE: HMC) also has a hydrogen FCEV, but it has limited availability to residents of California living near a hydrogen fueling station.
Then there's Iveco (OTC: IVCGF) and Nikola Corporation (NASDAQ: NKLA), who are jointly developing cab over battery-electric vehicles (BEV) and Hydrogen FCEV trucks, which will be manufactured in Europe through a legal entity 50/50 owned by Iveco and Nikola, and in the US by Nikola Corporation.
Johnson Matthey (LON: JMAT) makes fuel cell catalysts. The chemical company is focusing its efforts on hydrogen and decarbonizing chemical production since withdrawing from the lithium-ion battery space, which it deemed too competitive.
Meanwhile, ITM Power (LON: ITM) has been a UK innovator in bringing hydrogen energy to the fore.
ITM Power hydrogen refueling site at Johnson Matthey Fuel Cells in Swindon is open for public and private fleets operating FCEVs.
Like ITM, Plug Power has become a leading equity in the hydrogen space. Ushering the transition to a net-zero world is their aim, with the view that green hydrogen is integral to addressing climate change in both the short and long term.
There are risks to investing in Hydrogen. It's still early days for this potential energy game-changer. Therefore, companies are spending vast amounts of capital to make progress. This doesn't convert to revenues straight away, meaning most hydrogen stocks are speculative.
Companies may repeatedly raise capital, thereby diluting the share price.
Although climate change puts pressure on these companies to advance, many external events are holding things up. The pandemic, supply chain disruption and the war in Ukraine all contribute to a slowdown.
Hydrogen stocks are not immune to inflation. In Plug Power's recent Q1 earnings call, the company said its current power purchase agreements should help buffer against supply cost inflation. Nevertheless, it's seeing price escalation across some of its costs.
Hydrogen stocks are a long-term thematic strategy and are unlikely to be a recession-proof winner.
Thematic investing strategies such as hydrogen can pay off in the long term. But investors need patience and the ability to ride the waves of volatility.